Yamama Cement’s Q3 misses estimates on lower selling prices: Riyad Cap

Yamama Cement Co.’s net loss of SAR 46 million in Q3, missing Riyad Capital’s forecast of a SAR 2 million loss, mainly on lower selling prices due to fierce competition.

“We believe that the company’s bottom line was affected by its pricing strategy given the intense competition in the central region and we expect the price wars to continue through the final quarter of 2018,” the research firm said in an earnings report.

Revenues in Q3 dropped 34 percent year on-year (YoY) and 4 percent quarter-on-quarter (QoQ) to SAR 108 million, missing estimates of SAR 135 million.

Selling prices sharply dropped to SAR 97 per ton.

“It appears Yamama offered prices below its direct cost for the second consecutive quarter likely due to intense completion among producers in a quarter subject to seasonality (summer and Hajj holidays),” Riyad Capital said.

Accordingly, the cement producer’s market share fell 162 basis points QoQ to 12.2 percent in Q3.

Meanwhile, the company reduced inventory levels by 79 percent YoY. Clinker inventory levels, however, rose 20 percent YoY and 3 QoQ to 5.32 million tons.

Riyad Capital has revised its estimates for 2018-19, and now expects Yamama Cement to post net loss for fiscal year 2018.

It recommended a “Neutral” rating on the stock, with a target price of SAR 14 per share.